* Unions march in Madrid, Barcelona and Valencia
* Protest aimed at proposal to raise retirement age to 67
* More expected later in the week
(Updates with marches taking place)
By Jason Webb
MADRID, Feb 23 Unionised workers marched in Spain's major cities on Tuesday against plans to raise the retirement age in the first open clash for six years between organised labour and a Socialist government now seeking to appease markets with austerity.
But the main protest in Madrid seemed noticeably smaller than recent demonstrations in the capital organised by groups such as the Catholic Church, in a sign that unions, who now only represent 16 percent of Spanish workers, may have lost some of the power to paralyse the nation they once had.
Bond markets are watching closely as euro zone members Greece, Spain, Portugal and Ireland struggle to cut huge budget deficits bloated by recession and the financial crisis, and to restore lost economic competitiveness.
Prime Minister Jose Luis Rodriguez Zapatero has announced 50 billion euros ($67.93 billion) in government savings, as well as talks to change rigid labour laws that make it expensive for businesses to hire workers. But the move that brought the unions onto the streets was his plan to raise the retirement age by two years to 67.
"Mr Prime Minister, don't play around with pensions, with the future of millions and millions of people in our country," said Ignacio Fernandez Toxo, leader of the largest labour confederation, Comisiones Obreras, in a speech to the crowd in Madrid's central square of Puerta del Sol.
The well-behaved crowd totalled tens of thousands, according to Reuters reporters. Local media quoted police saying 9,000 people took part and unions claiming 60,000. Other marches of similar sizes took place in Barcelona and Valencia, and protests elsewhere in the country were due in coming days.
Marchers carried red flags and some blew whistles but there were relatively few young people among the marchers and almost no obvious immigrants. Many held up signs against the government and calls for it to get tougher on banks.
"They're asking for sacrifices from the same people who always have to make them, the workers, who are just the people who didn't cause the financial crisis," said Carlos, 47, a high school teacher.
PRIME MINISTER CONCILIATORY
But other marchers were more sceptical of the unions, who have only now stirred against the government despite unemployment doubling to 20 percent during the crisis.
"I think it's good that we protest, but I think our unions are just doing this to show they're not totally inactive. They haven't done anything," said Rosa, 64, a civil servant.
One opinion poll showed roughly half of Spaniards would support a general strike against raising the retirement age, but the two big labour confederations have played down such combative talk.
The government has kept unions onside by promising not to yield to business calls to make hiring and firing cheaper.
The prime minister was conciliatory on Tuesday, reminding unions that he wanted to reach an agreement with them on reforms to the pension system.
"But the government would be irresponsible if it didn't point clearly to this country's ageing demographics," Zapatero told a news conference.
Zapatero, worried by the spiking cost of debt ES10YT=RR during the Greek crisis, wants to slash a budget deficit that hit 11.4 percent of GDP in 2009 and ensuring long-term fiscal sustainability.
During the Greek crisis, markets raised Spain's risk premium on fears that with its high unemployment, rigid workforce and low productivity, Madrid may be unable to prevent public debt spiralling, especially as euro membership rules out devaluation.
The head of the Organisation for Economic Cooperation and Development (OECD), Angel Guerria, said on Tuesday that Spain's public debt was still manageable and not comparable with Greece.
Without major reforms, Spain could struggle to achieve economic growth and its financial system might be weakened, Bank of Spain Gov. Miguel Angel Fernandez Ordonez said on Tuesday. (see [ID:nLDE61M16K] (Additional reporting by Diego Hernandez)